Buying tax haven passports and properties won't avoid CRS for long



OECD has stated residence-by-investment-schemes will not undermine automatic exchange of information


Only the uninformed, ignorant or misled consider buying a passport and property in a tax haven or territorial tax jurisiction is a reliable solution to avoid the Common Reporting Standard




The OECD has updated its CRS implementation and assistance web page:

TINs & TAX RESIDENCY INFORMATION

In addition, jurisdictions have made information available with respect to their Tax Identification Numbers (TINs) and tax residency rules, in order to help both taxpayers and financial institutions to comply with their obligations under the CRS.

OECD has stated categorically it will close residence-by-investment schemes such as buying tax haven passports

The top CRS loophole being closed by the OECD is residency-by-investment programs. This is buying a passport and property in a jurisdiction for tax purposes. The investor then fraudulently self-certifies their tax residency is the tax haven and supports this with his address of his property, even if he doesn't actually reside in the tax haven long enough, if at all, to be a a genuine tax resident.

17 October 2017 - The OECD has almost completed its closure of this loophole on its CRS implementation and assistance web page. The reporting FI must confirm the claimed tax residency of their client is according to the number of days stayed in the jurisdiction. Therefore the identiy / utility bill is no longer proof of residence. This brings to an end all these residence by investment programs.

There are now just a handful of tax haven participating jurisdictions who have not yet submitted to the OECD its tax residence rules for CRS, e.g. no rule yet for St. Kitts, Aruba, Curacao, BVI, Cook Islands, Antigua, Barbados, Bahamas, Panama, etc. Once this list is completed, an update to CRS tax residency will be issued via an update to the OECD FAQ.



1. OECD says it will shortly close the CRS loophole of residence-by investment schemes



December 2016 Financial Times - Pascal Saint-Amans, the top tax official at the OECD, says the residence-by-investment schemes offered by governments such as Malta, Cyprus and in the Caribbean will not undermine the transparency drive. We are working on this. It will not survive long.
2. Example of common Caribbean residence by investment scheme

St. Kitts and Nevis



Pascal Saint-Amans on St. Kitts / Nevis citizenship by investment scheme
See around 23m00



"...for a few thousand hundred thousand dollars anyone can get residency in Nevis to avoid paying tax."

3. Example of common Asian residence by investment scheme



Singapore

For an individual to be regarded as a tax resident, he has to satisfy at least one of the following tests:
  1. Quantitative Test
    The individual is:
    • Physically present in Singapore for at least 183 days in the calendar year preceding the year of assessment; or
    • Exercises an employment in Singapore for at least 183 days in the calendar year preceding the year of assessment (excluding directors of a company)
  2. Qualitative Test
    The individual must reside in Singapore and that his absence from Singapore must be temporary and reasonable.
4. 6 June 2017 - OECD mentions tackling residence-by-investment schemes. The OECD is also in close contact with a number of jurisdictions in order to assess whether other schemes that have been disclosed through the facility (including a number of residence by investment programmes) may pose an actual risk for avoiding CRS reporting and therefore need to be addressed.

5. 25 Sep 2017 - The OECD is focused on maintaining the integrity of the CRS. The OECD is taking extra precautions to ensure that reportable financial information regarding financial institution Account Holders that are subject to reporting is reported. The OECD has stated that there are potential and perceived loopholes in the CRS that require significant changes and amendments in certain Jurisdictions for the automatic exchange of information to be effective. The OECD Secretary-General (Angel Gurria) has stated that the loopholes and deficiencies within the CRS encourage the use of secrecy to evade taxes. The OECD considers the following loopholes as the most serious to close:
  • Financial Institutions assisting with account shifting
  • Residency through investment programs
  • Shifting of assets to non-CRS jurisdictions
  • Shifting of assets within the same jurisdiction
  • Non-cash value insurance products (see irrevocable insurance)